Andrey Goltsblat and Anton Sitnikov are among the worldâs leading M&A lawyers

Andrey Goltsblat, Managing Partner of Goltsblat BLP and Senior Partner in Corporate / M&A and Investment Projects and Anton Sitnikov, Partner, Head of Corporate / M&A of Goltsblat BLP, the Russian practice of the international law firm Berwin Leighton Paisner (BLP), have been identified by the prestigious legal directory Whoâs Who Legal as being among the worldâs leading M&A lawyers.

Practical aspects of JVs in Russia: conflicts between venturers, behavior patterns and typical mistakes Anton Sitnikov, Partner, Head of Corporate, Anton Panchenkov, Head of Group, Corporate/ M&A Goltsblat BLP is the Russian practice of Berwin Leighton Paisner, an award-winning international law firm.

Why have Russian law shareholder agreements gained momentum recently? Some companies (primarily state-linked ones) had followed this route long before the Civil Code was reformed and the first amendments concerning shareholder agreements were introduced into specialised laws. Yet the political environment has now changed: the deoffshorisation law has given a fillip to JV establishment within Russia. A second factor consists in the sanctions: for companies not permitted to conduct business with foreigners, establishing a holding company in a European jurisdiction can no longer be considered an option. Finally, there is now a marked trend, especially among major state-owned or state-linked companies, favouring establishment of joint ventures in Russia.

The weakening of the Russian economy under the impact of the sanctions imposed by the West and against the backdrop of falling global energy prices is having an adverse effect on foreign trade, which has contracted significantly over the last year. In the current situation, the Russian authoritiesâ intent to support development of domestic manufacturing is both predictable and consistent.

An important step in this direction is Federal Law No.488-FZ dated December 31, 2014 "On Industrial Policy in Russia", which came into force on June 30, 2015.

In March 2015, the Federal Antimonopoly Service Commission delivered two landmark decisions recognising as unacceptable so-called surrogate advertising of prescription medications by promoting non-prescription products under âumbrellaâ brands.

When a recession hits, distressed assets become a popular topic, their purchase often being seen as a good investment in times of crisis. Yet the matter is not so simple, especially when it comes to so-called distressed assets on the commercial real estate market.

I believe itâs so important for the company management, as well as for in-house lawyers and GCs, to be clear about the role of the legal function and its objectives. In the note below, I would like to summarise my 22 years of observing the different aspects of the GC role.

Legislators seem to be pressing developers and landowners into activity by creating disincentives to keeping land off the market in the hope of finding a more attractive buyer. Proposed legal changes aim to govern public land allocation more precisely. The result could be positive for the market and bring more transparency to developers' operations.

Last week, the President signed and published Federal Law No. 305-FZ dated 14 October 2014 "On Amending Russian Federation Law "On the Media".

Compared to the current Russian Federation Law "On the Media" and the Federal Law "On Foreign Investments in Businesses of Strategic Importance for National Defence and Security", this new law will restrict substantially foreign control over the media.

Law-abiding companies that have operated in Russia for many years sometimes have to defend their rights to land. IKEA's victory against unscrupulous plaintiffs set a new benchmark in court practice for protecting property rights.

Most Internet shops allow payments via Webmoney, BitCoins or local e-currencies, such as Yandex.Money. Effecting payments through these instruments provides obvious benefits for customers: convenience and timeliness, anonymity and security of payments, which do not require transfer of bank card data. It is no surprise, therefore, that CEO's of some Russian banks have said recently that the bank would compete with big Internet companies, the likes of Google, Alibaba, Amazon and Yandex. But how does the future reality, if it materialises, fit into the existing legislative framework?

By Artem Toropov, senior associate in international tax, Goltsblat BLP

On March 18, following the Russian President's address on "de-offshorisation" of the Russian economy and only a few months of drafting, the Russian Finance Ministry published the first draft law on anti-avoidance rules that has already sent ripples through the Russian business community.

While the draft law may be amended following discussions with corporates and readings in the Duma, the law, along with other laws on "de-offshorisation", is expected to be passed before 15 June 2014 and come into effect on 1 January 2015. Now is the time for Russian corporates and Russian HNWIs to urgently assess the risk of their existing international structures - both corporate and private - and identify the best strategies going forward.

The so called "Anti-piracy law" has been in effect for a few months now. The Law amends the legislation in a way allowing access to Internet sites hosting illegal audiovisual works to be restricted under interim relief measures before there is a final court judgment or even before a relevant lawsuit is filed.

So we believe that the first results may already be summarised. The new Law can be said to be used extensively. Judging from publicly available information, there have been more than a hundred new Law based applications, with sites covered by interim relief measures being counted in the dozens.

Further to the above issues that have a degree of uncertainty requiring court analysis and judgement, sometimes you can face fairly odious errors in tax treaty application. These include such "casualties" as the Promleasing case, where both the taxpayer and the tax authorities were drawn into an embarrassing discussion proving that a Russian LLC is a Russian enterprise because its CEO is a Russian citizen, evidently misinterpreting the term "enterprise" for treaty purposes (see Resolution No. ĐĐ-Đ40/6805-11 dated 08 July 2011). Another renowned case included a court ruling that the Protocol to the Russia-Germany Double Tax Treaty expressly specifying an additional guarantee of unlimited interest cost deduction could not apply at all, because this benefit discriminates against Russian companies qualifying as Russian subsidiaries of German residents (See the Rulog case No. Đ40-37344/11-107-160 dated 19 November 2012). This statement is as outrageous as the suggestion that an international tax treaty is required for Russia not to discriminate its Russian companies against one another. No practical advice can be given for avoiding such an odd situation other than ensuring that development and presentation of the legal position in a tax dispute is assigned to adequate professionals.

The turn in the direction of denying formal approaches discussed above does not work equally in all respects. Given the above SCC position that the full amount of tax not withheld can be claimed from the tax agent, it is in the interests of Russian paying entities to invest sufficient efforts in ensuring the formal side of the matter where a double tax treaty exemption applies. The core recommendation is simple: to obtain, in a timely fashion, an adequate and duly apostilled tax residence certificate for the payee that is entitled to double tax treaty exemption. If this seems natural with independent parties, it is often an annoying routine with group companies: why bother obtaining new certificates if the parties are quite sure where the parent company is located and tax resident? Yet it is crucial to prepare all the documents beforehand, since these formalities might take a substantial time and, if you fail to present the documents during a tax audit, you might lose the case.

Interestingly, where courts notice alleged tax base erosion, they try to go further than the existing legislation allows and expand it by referring to tax treaties. Among recent examples is the United Bakers case, where the court ruled that thin capitalisation rules may apply to a foreign sister company, a case not envisioned in the Tax Code, by referring to Article 9 of the Luxembourg-Russia Double Tax Treaty, claiming that these are associated enterprises (see No. Đ52-4072/2012 dated 18 September 2013).

From our recent practice, we see a general decline in respect of double tax treaty provisions by law-enforcers and growing apprehension and concerns on the part of clients applying tax treaty benefits. We believe that this incorrect interpretation of double tax treaties has been provoked by inaccurate wording of the SCC Resolution on the Severny Kuzbass case (No. 8654/11 dd. 15 November 2011). In this infamous ruling, the SCC overthrew the stable case law based on consensus that the Russian thin capitalisation rules could not apply where double tax treaty non-discrimination provisions were in place. The court found the rules applicable to Russian corporates with foreign capital only as being non-discriminatory and stated that the treaties did not interfere in Russia's right to apply domestic thin capitalisation rules as it saw fit.

A foreign investor operating in Russia through any form of corporate presence faces the need to make use of and rely on at least some international tax law concepts. Having double tax treaty protection is a benefit that, if properly structured, can provide significant tax savings in the long run. Yet enforcing the tax treaty provisions in Russia might be a challenge, considering the gaps in the tax legislation, which courts tend to fill by interpreting tax treaties broadly and borrowing the international anti-avoidance concepts, which often has unexpected results.

Cyprus hit the headlines for a very bad reason this year. The sunny Mediterranean island has long been a number one choice both for Russian businesses to purchase, hold, finance and sell domestic assets and for many foreign investors to invest in Russia. But the 2012-2013 Cypriot financial crisis has resulted in a temporary freezing of the bank accounts of many businesses, the balances in the Bank of Cyprus and Laiki Bank being diminished by being given a haircut, people getting angry and losing faith in the once-trusted jurisdiction and its banks. Even your favourite Cypriot Meze does not taste as good anymore. Once you thought you were protected by a stable legal system and a reliable banking system. One can bet you are not so sure now. So the question is: What should you do now?

Ahead of the 2013 St. Petersburg Economic Forum, we have launched our latest book "A Case Study Guide to M&A Transactions in Russia." We hope it will enjoy the same levels of success as our first book, "The Use of English Law in Russian Transactions - a comparative review," which proved to be a great success and is now a recommended legal text for lawyers, law professors and students, judges and legislators alike. Our new Case Study Guide has a broader appeal and will also be of interest to directors and senior executives, entrepreneurs, bankers, professional advisers and business people generally.

Creation of a favourable investment climate and attraction of foreign investment constitute one of the most important economic objectives set by the state over the last 5-7 years. At the same time, despite the fact that this goal is a priority, its attainment should not run counter to state interests or jeopardise the countryâs economic security. Guided by this principle, state authorities and, in particular, the Federal Antimonopoly Service (hereinafter â the FAS), exercise direct control over foreign investment in companies of strategic significance for state security. Moreover, such control has not recently been confined to some formal process without any practical basis; it is gradually becoming a real and effective regulation mechanism capable of exerting a material effect on the activities of given market players that violate the established control procedure.

In the context of the sale and purchase of a private company, there are some notable differences in the usual market approach of a âUK-styleâ versus âUS-styleâ share sale and purchase agreement (SPA).

Goltsblat BLP advises that Resolution of the Government of the Russian Federation No. 736 (the Resolution) was adopted on 19 July 2012. This determines the criteria for identifying a serious deterioration in the environmental situation resulting from use of agricultural land in violation of the requirements for rational land use stipulated by the land legislation.

Goltsblat BLP advises that Federal Law No. 380-FZ "On Economic Partnerships" dated 3 December 2011 came into force on 1 July 2012, while Federal Law No. 335-FZ of 28 November 2011 "On Investment Partnerships" has been effective since 1 January 2012. The laws offer new structures for formalising innovative and investment business presence in Russia, in particular:

Goltsblat BLP advises that pursuant to adoption of Federal Law No. 337-FZ dated 28 November 2011 "On Amendments to the Russian Town-planning Code and Certain Legislative Acts of the Russian Federation", a number of regulations governing expert evaluation of design documents and engineering survey results are due to take effect in May - June 2012.

Goltsblat BLP advises that the Moscow Region Government has adopted Resolution No. 639/16 of 2 May 2012, establishing the sales price for land plots owned by the Moscow Region or in undelimited state ownership to be sold to individuals and legal entities owning buildings, structures and facilities accommodated by these land plots (clause 1.1, article 36 of the Russian Land Code).

Further to our information letter No 322 of 25 January 2012 regarding explanations by the FTS of Russia on concluding advance pricing agreements (APAs), Goltsblat BLP advises that the Russian Ministry of Justice has registered Order No ĐĐĐ-7-13/182@ of the Federal Tax Service of Russia dated 26 March 2012 (the Order), approving the eligible grounds and procedure for extending the period for consideration of applications for signing advance pricing agreements for tax purposes and the accompanying documents and also approving the formats for standard resolutions in connection with conclusion of such agreements.

Goltsblat BLP advises that, on 27 March 2012, the Constitutional Court of the Russian Federation adopted Resolution No. 8-P on a case of examining the constitutionality of clause 1, article 23 of the Federal Law "On International Treaties of the Russian Federation".

Goltsblat BLP advises that the Russian Government has adopted Resolution No. 369 dated 23 April 2012, determining the following signs of non-use of land plots in consideration of the specific nature of agricultural production or other activities related to agricultural production in constituent entities of the Russian Federation:

Goltsblat BLP advises that, by its Resolution No. 213 of 21 March 2012, the Russian Government has amended the lists of products subject to mandatory certification and of those compliance by which is confirmed by a compliance declaration. These amendments come into effect on 26 May 2012.

Goltsblat BLP advises that the Presidium of the Supreme Arbitration Court of the Russian Federation officially published the Resolution No 11637/11 dated 07 February 2012 on a case against OOO Leroy Merlin Vostok.

Goltsblat BLP advises that the Resolution of the Presidium of the Supreme Arbitration Court of 28 February 2012on Case No. 15935/11 (hereinafter "the Resolution") has been published. The Resolution contains several conclusions that are significant for practical application of Federal Law No. 127-FZ "On Insolvency (Bankruptcy)" dated 26 October 2002 (hereinafter - "the Bankruptcy Law").

Goltsblat BLP hereby advises of new Russian Government Resolution No. 191 dated 6 March 2012 introducing new rules for determining the customs value of commodities exported from Russia (the Resolution). The Resolution comes into effect on 14 April 2012, superseding the previous rules.

Goltsblat BLP advises of the publication of Resolution of the Constitutional Court of the Russian Federation of 9 February 2012 No. 2-P on a case of checking the constitutionality of a provision of part eight, article 325 of the Labour Code of the Russian Federation in connection with a complaint submitted by Ms I.G. Trunova (the Resolution).

Negotiating is an art and not a science and there is never a ârightâ way to negotiate. When it comes to Russian deals, a general rule of thumb is to be patient, keep your cool but always remain firm and consistent in your approach and tactics.

Goltsblat BLP advises that Federal Law No. 9-FZ âOn Ratifying the Protocol Amending the Agreement between the Government of the Republic of Cyprus and the Government of the Russian Federation for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital dated 5 December 1998â was adopted on 28 February 2012.

Law firm Goltsblat BLP informs that Order of the Ministry for Health and Social Development of the Russian Federation dated 27 December 2011 â1653Đœ was adopted (hereinafter the âOrderâ), which approves the List of professions (specialties, positions) for which an entity can employ foreign nationals in 2012 without mandatory prior quota allocation. The Order comes into force on 19 February 2012.

Goltsblat BLP advises that Federal Law of 6 December 2011 No. 401-FZ âOn Amendment to the Federal Law âOn Protection of Competitionâ and certain legislative acts of the Russian Federationâ (the Law) came into effect on 6 January 2012 (apart from certain provisions). The Law updates legal regulation of combating monopolistic activities and restriction of competition by the authorities, economic concentration, etc.

Federal Law of 6 December 2011 No. 404-FZ âON amendments to the Code of Administrative Offences of the Russian Federationâ came into effect on 7 January 2012;

Federal Law of 6 December 2011 No. 401-FZ âOn Amendment to the Federal Law âOn Protection of Competitionâ and certain legislative acts of the Russian Federationâ, containing, in particular, amendments to article 178 of the Criminal Code of the Russian Federation, came into effect on 6 January 2012.

Goltsblat BLP advises that a number of car companies have lately been held administratively liable by the Federal Anti-monopoly Service for not providing the requisite information in commercials advertising credit proposals broadcast by central and cable television channels at their request.

Goltsblat BLP advises that Resolution of the Government of the Russian Federation No. 1137 âOn the Formats and Rules for Completing (Maintaining) Documents Used in Value Added Tax Settlementsâ was adopted on 26 December 2011 (the Resolution).

Goltsblat BLP advises that, on 17 January 2012, the Presidium of the Russian SAC issued a Ruling under Case No. Đ40-89211/10-30-762 recovering real damage and lost profit from the Federal Customs Service in favour of an exporter owing to an unlawful order.

Goltsblat BLP advises of the publication of Resolution of the Presidium of the Russian Supreme Court No. 8817/11 of 29 November 2011 upholding decisions of three lower courts in relation to a case on early termination of legal protection for the VECHERNIE trade mark with respect to goods under ICGS class 05 "pharmaceuticals" and "dietary substances for medical purposes" because the trade mark has been used during production and sale of biologically active supplements that are not on the registered list of goods.

Goltsblat BLP advises of publication of Supreme Arbitration Court Resolution No. 3844/11 dated 25 October 2011 on the case of OOO Tulatsement. The Resolution confirms the possibility to recover input VAT on repairs to another personâs property, even if the taxpayer has no right to such property and other people or entities may also use such repair results.

Goltsblat BLP advises that Federal Law of 6 December 2011 No. 401-FZ âOn Amendment to the Federal Law âOn Protection of Competitionâ and certain legislative acts of the Russian Federationâ, envisaging, in particular, a change in control over transactions and other actions affecting the state of competition, came into effect on 6 January 2012.

Federal Laws No. 380 of 3 December 2011 "On Economic Partnerships" and No. 393 of 6 December 2011 "On Amending Article 50 of Part I of the Civil Code of the Russian Federation following adoption of the Federal Law "On Economic Partnership"" will come into effect on 1 July 2012.

Goltsblat BLP advises that Federal Law of 7 December 2011 No. 419-FZ "On Amendment of the Criminal Code of the Russian Federation and article 151 of the Criminal Procedure Code of the Russian Federation" came into effect on 19 December 2011.

Goltsblat BLP advises of adoption of Federal Law of 12 December 2011 No. 427-FZ "On Amendment of Articles 2 and 3 of the Federal Law 'On Introduction of the Land Code of the Russian Federation'" and certain legislative acts of the Russian Federation (the Law).

Goltsblat BLP advises that Federal Law No. 427-FZ âOn Amendments to Articles 2 and 3 of the Federal Law âOn Enactment of the Russian Land Codeâ and certain other Legislative Acts of the Russian Federationâ (the Law) was adopted on 12 December 2012.

Goltsblat BLP advises that Resolution No. 7905/09 dated 20 September 2011 of the Presidium of the RF Supreme Arbitration Court has been published following an application filed by the Federal Antimonopoly Service ("Russian FAS") for supervisory review of lower court acts regarding the legitimacy of tenders (auctions) conducted by the Forestry Office for the Moscow Region and the City of Moscow ("Mosleskhoz") for sale of the right to enter into forested area leases.

Legal Update No. 301
Goltsblat BLP advises that Federal Law No. 329-FZ of 3 December 2011 âOn Amendments to Certain Legislative Acts of the Russian Federation in Connection with Improving Federal Anti-Corruption Regulationsâ has been adopted and will come into effect on 3 December 2011 (apart from its tax secrecy provisions which will take effect from 22 December 2011).

Goltsblat BLP advises that Federal Law No. 379-FZ of 3 December 2011 âOn Amendments to Certain Legislative Acts of the Russian Federation Pertaining to Tariffs for Insurance Payments to State Extra-Budgetary Fundsâ (the Federal Law) was adopted and will come into effect on 1 January 2012.

Goltsblat BLP advises that Federal Law No. 374-FZ dated 01 December 2011 has ratified the Eurasian Economic Commission Treaty signed by Russia, Belarus, and Kazakhstan on 18 November 2011. The Treaty applies provisionally starting from the signing date and will come into effect once the depositary is notified by the parties that they have fulfilled the relevant domestic procedures.

Federal Law of 3 December 2011 No. 381-FZ âOn Amendment of the Federal Law âOn Additional Measures to Strengthen Stability of the Banking System during the Period up to 31 December 2011ââ came into effect on 16 December 2011;

Goltsblat BLP advises of the signing, on 21 November 2011, of a Protocol on Amendments to the Treaty between the Russian Federation and the Grand Duchy of Luxembourg on Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital of 28 June 1993.

Goltsblat BLP advises that Federal Law No. 330-FZ "On Amending Part Two of the Tax Code of the Russian Federation and Article 15 of the Russian Law "On the Status of Judge in the Russian Federation" and Invalidating Certain Legislative Provisions of the Russian Federation" was adopted on 21 November 2011.

Goltsblat BLP advises on adoption of Federal Law No. 322-FZ, dated 16 November 2011, âOn Amendments to Article 6 of the Federal Law âOn Foreign Investment in the Russian Federationâ and the Federal Law âOn Foreign Investment in Companies of Strategic Importance for National Defence and Securityâ , which comes into force on 18 December 2011.

Goltsblat BLP advises that the Presidium of the Supreme Arbitration Court of the Russian Federation adopted, on 15 November 2011, a resolution on case No. ĐĐĐĄ-8654/11 on an application from a tax authority for supervisory review of judicial acts of lower courts in relation to OAO Coal Company Severniy Kuzbas.

Goltsblat BLP advises of publication of Resolution No. 443/11 of the Presidium of the Supreme Arbitration Court (SAC) dated 13 September 2011 clarifying pricing of shares to be sold pursuant to article 84.8 of the Federal Law âOn Joint-Stock Companiesâ.

Goltsblat BLP advises of publication of Federal Law No. 321-FZ dated 16 November 2011 âOn Amendments to Part 1 and 2 of the Tax Code of the Russian Federation in Connection with Creation of a Consolidated Taxpayer Groupâ (except for certain provisions).

Goltsblat BLP advises that Resolution of the Government of the Russian Federation of 3 November 2011 No. 881 âOn the procedure for setting start (maximum) prices for contracts (separate lots) for individual types of medical equipment for the purpose of their inclusion in the documentation on tenders to supply such equipmentâ (the Resolution) comes into effect on 19 November 2011.

New Russian public health laws that will begin coming into effect on Jan. 1, 2012, reflect an unprecedented surge in interest, following the first proposals to amend Russia's core legislation on public health protection, just over a year ago. Industry players and the public need to be aware of what the changed laws mean.

The UK Bribery Act 2010 has far reaching territorial application and can even apply to Russian companies.

Affected companies must now have in place adequate internal anti-bribery procedures and ensure the same compliance of any of its associated persons. Strong contractual protections may prove necessary to limit exposure to prosecution under the Act.
The increased scrutiny may lead to fewer deals being concluded successfully and a short-term decrease in foreign investment in Russia.

Goltsblat BLP advises that Federal Law of 19 October 2011 No. 284-FZ âOn Amendment of Articles 809 and 810, Part Two, of the Civil Code of the Russian Federationâ (the Federal Law) came into affect on 1 November 2011.

Goltsblat BLP advises that Federal Law No. 289-FZ of 21 October 2011 âOn Amendments to the Federal Law on the Procedure for Publishing and Enacting Federal Constitutional Laws, Federal Laws, and Acts of Chambers of the Federal Assemblyâ (the Federal Law) came into effect on 10 November 2011.

Goltsblat BLP advises that Resolution No. 1795/11 of 13 September 2011 of the Presidium of the Supreme Arbitration Court of the Russian Federation (the Resolution) has been published on a case brought by Stena RoRo AB (Sweden) for supervisory review of judicial acts following a lawsuit by Baltiysky Zavod shareholders against the Plant and Stena RoRo AB seeking to invalidate obviously detrimental transactions concluded by the Plant.

Most of the world's airports are not private but are owned by state or regional governments, reflecting the immense cost of building them, coupled with the strategic importance they have in national economies and transportation systems.

Despite being a feature of a different legal system, trusts are a common part of a personal ownership structure used by many Russian high-net-worth individuals (HNWI). Trusts are often sold by many providers as "a magic solution" without mentioning some of the potential practical difficulties that the beneficiaries may face. In this article, we look at some of the typical issues that Russian HNWI face when using trusts (in particular, English law trusts) and some of the approaches to solve these issues.

Almost from the time the Second Anti-Monopoly Package came into force on Aug. 23, 2009, the Russian Federal Anti-Monopoly Service (FAS) embarked on developing further amendments to the Russian antitrust law.